The United States monetary authority cut interest rates on Wednesday, marking the second rate cut in the current year amid economic turbulence originating from the federal government shutdown and trade duties.
Move Comes at Unprecedented Time for Central Bank
The decision to reduce the benchmark interest rate by a quarter point to a range of 4% to 3.75% arrives at an unprecedented juncture for the Fed. The institution has been under immense pressure to cut rates despite persistent inflation.
Fed Statement Highlights Job Market Changes
In a statement, the Fed stated that the jobless rate had increased but remains low. “Employment growth have decelerated,” the release notes. “Price increases has moved up and remains moderately high.”
Government Shutdown Hinders Fed’s Job
The ongoing federal government shutdown, now one of the longest in US history, has also complicated the Fed’s job. Collection of important economic data has been indefinitely halted as employees at the Bureau of Labor Statistics are furloughed during the shutdown.
Information Shortage Affects Policy Decisions
The Fed typically studies BLS data to determine labor market conditions, including the count of new jobs added to the market and the current unemployment rate. The last jobs report was published in early September, before the closure, and provided a somewhat gloomy snapshot of the employment scene in August.
The figure of positions created to the economy in the summer month was lower by over 100k since the spring, and unemployment crept up to 4.3% – the peak since three years ago.
Alternative Reports Indicate Ongoing Decline
Though the bureau was scheduled to release last month’s job market report in the start of last month, it halted its release when the closure began. Private payroll firm a leading payroll processor reported recently that the business segment cut 32,000 jobs in September, a sign that the employment landscape is continuing to slow.
“Both the supply and demand for labor has fallen significantly,” central bank head Jerome Powell said earlier this month, which he had earlier said stems from trade and immigration measures.
Price Data Reveals Moderate Increase
Though BLS’s jobs report has been suspended, the bureau still issued its price statistics for last month that showed that prices are rising, albeit gradually. Prices increased 3% over the past twelve months, the peak since January. In spring, the annual inflation rate was two point three percent, the lowest it has been since three years ago. The central bank’s goal inflation rate is 2%.
